Correlation Between M/I Homes and Public Storage
Can any of the company-specific risk be diversified away by investing in both M/I Homes and Public Storage at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining M/I Homes and Public Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and Public Storage, you can compare the effects of market volatilities on M/I Homes and Public Storage and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in M/I Homes with a short position of Public Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of M/I Homes and Public Storage.
Diversification Opportunities for M/I Homes and Public Storage
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between M/I and Public is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage and M/I Homes is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MI Homes are associated (or correlated) with Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of M/I Homes i.e., M/I Homes and Public Storage go up and down completely randomly.
Pair Corralation between M/I Homes and Public Storage
Assuming the 90 days horizon MI Homes is expected to generate 1.68 times more return on investment than Public Storage. However, M/I Homes is 1.68 times more volatile than Public Storage. It trades about 0.06 of its potential returns per unit of risk. Public Storage is currently generating about -0.02 per unit of risk. If you would invest 13,880 in MI Homes on September 12, 2024 and sell it today you would earn a total of 1,150 from holding MI Homes or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. Public Storage
Performance |
| Timeline |
| M/I Homes |
| Public Storage |
M/I Homes and Public Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M/I Homes and Public Storage
The main advantage of trading using opposite M/I Homes and Public Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M/I Homes position performs unexpectedly, Public Storage can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Public Storage will offset losses from the drop in Public Storage's long position.The idea behind MI Homes and Public Storage pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Public Storage vs. Prologis | Public Storage vs. SEGRO Plc | Public Storage vs. Yara International ASA | Public Storage vs. EastGroup Properties |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.
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